Going For Gold, On And Off The Field

As the UK Government’s Chief Economist in the US, one of the things people ask me about most frequently is the Olympics. This line of discussion comes from all kinds of angles – which restaurants should people visit, what will the weather be like? But one of the most tantalising questions has to be from the economic perspective – what will the economic impact of the Olympic Games be?

There are two sides to this question. First, the raw arithmetic as the Olympics do or do not make themselves felt in our GDP and other economic numbers. Second, the deeper, underlying lines of transmission between the UK and the rest of the world as a consequence of the Olympics-one part of which is very much economic.

First, the numbers. As someone who once famously predicted heavy snowfall would have absolutely no net economic impact at exactly a moment when heavy snowfall took a nasty chunk out of the UK economy in Christmas 2010, you think I would have learned my lesson to avoid quantitative predictions about economic activity and cultural, weather or other events. And in a sense I have. Which is why I feel more comfortable leaving it to my expert colleagues at the independent Office For Budget Responsibility who wrote back in March:

“GDP growth may also be affected by the Olympic Games. The associated ticket sales, worth approximately 0.1 per cent of GDP, will boost GDP growth in the third quarter of 2012 and reduce it by the same amount in the final quarter. The size and even the direction of the other effects associated with the Games are far less certain. The Games may lead some workers to take more annual leave over the period in which they take place, which could redistribute output from the third quarter to earlier or later in the year. It is also unclear whether the Olympics will generate an increase in net tourism or whether some visits will be delayed or cancelled… Given the uncertainties and the relatively small size of any possible effects, we assume that, apart from the ticket sales effects, the Olympics will not have a material effect on the quarterly path of GDP. This is consistent with a number of studies which suggest that the overall economic impact is likely to be small”.

That to me feels a sensible judgement. After all, if the Olympics were somehow a secret tool of economic policy making, every country would be holding Games every few weeks.

But the second level, the underlying impact of the Games and their economic legacy, are arguably more significant. The next few weeks will see the UK showcased in a way like never before. Hundreds of thousands of visitors will flock to the UK. Some of them are business people attending the Business Embassy conferences at Lancaster House, or getting a firsthand look at Britain’s top-notch universities that are producing the creators and innovators of tomorrow, at the investments we’re making in super-fast internet and transportation infrastructure, and at the Budget policies and tax reforms that are attracting investment from around the world.

And they’ll see not just that Britain is open for business, that but the Games  themselves are open to  global business.  Despite the furore over here about where the US Olympic Team uniforms are made, we’re making sure that contracts for the games are tendered far and wide, ensuring the best value for money for the taxpayer.  Many of those companies winning the contracts are from the US.

These channels are important. But they are subtle and nuanced and, frustratingly for us numbers junkies in the economics profession, won’t necessarily be measurable for a long time. But, as we continue to wrestle with economic challenges while enjoying the splendour of these Games, we should not lose sight of how this historic event will resonate for years to come.